Business Cycle Synchronization between United States and African Region: Some Empirical Evidence

Abstract

This article analyzes the transmission cycle of the United States to emerging markets of the Middle East and North Africa. The related empirical literature dedicated to the transmissions of financial and real shocks on business cycles in emerging African countries does not lead to firm conclusion. We propose a different empirical approach allowing unlike previous studies to analyze how the real and financial shocks are transmitted from the United States to the region of Africa. Based on a new econometric approach in terms of Global VAR model this paper attempts to study the effect of shocks from the United States on the Middle East and North Africa countries, considering the crucial role of trade integration in the integration process in the region of Africa. The model has the advantage of conducting empirical investigations of a large number of countries. The GVAR is estimated for 32 countries over the period 1980-2013. From the functions of impulsive responses generated by this model, our results show the presence of a significant transfer of real and financial shocks of the United States to emerging countries of Africa. This result confirms the idea that a recession affecting the United States tends to affect emerging economies of Africa and even up to cause a recession in the latter.